So I decided to do the same with my E30. I noticed the airfilter box has a 3" to 2.5" inlet tube coming out of it pointing toward the hole in the back of the headlight cover. I just connected the dots and there is a definite difference.
For about $100 you can go to PepBoys and get the following
K&N drop in filter ~$50
APC 3" extendable tubing $20 (consider getting some clamps)
*I'm now using a piece of PVC and just a small section of the flexible tubing to reduce turbulence in the tube as well as making it less temperature sensitive*
APC 6"- 3" cone inlet $20
Some, or most of you that are running projector style lights may not be able to do this the same way I did. You may have to ditch the cone.
I'll do a proper write up with more pics soon. But it's pretty simple to figure out. Basically replace the stock inlet tube with a 3" straight tube and put a cone on the end between the space behind the headlights and the headlight access cover which acts as a heat shield. It looks stock but sounds and feels good :D

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